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September 13, 2013

Merrill Edge Makes Big ETF Push

The mass-affluent platform is likely to add alternatives and other products in the future to boost assets and clients, executives say

Bank of America flag. (Photo: AP)

Merrill Edge says it has expanded its mass-affluent platform to include an ETF trading tool, and plans for more portfolio tools are in the works. Clients can trade ETFs online for $6.96, with 30 free online trades per month for some qualifying investors.

“This is part of our goal for Merrill Edge and especially for self-directed clients: Help them build portfolios with our capabilities around a selected list of ETFs and funds to choose from confidently and for good performance,” said Alok Prasad, head of Merrill Edge, in an interview with ThinkAdvisor.

Bank of America (BAC) launched Merrill Edge three years ago. The program now has about 1.6 million clients; some are self-directed investors, while others work with Merrill Edge advisors, mainly by phone.

“We are at $87 billion in assets as of August, with strong, 17% momentum in year-over-year growth, and we want to grow further,” said Prasad (right). “The Merrill Edge Select ETFs is part of our value proposition to make it easy and simple to invest with us.”

The ETF platform was launched in late August. It includes 61 products from Vanguard, iShares, State Street and other industry leaders, organized into five broad categories and 21 subcategories. Clients can select ETFs and work to rebalance their portfolio with these products in conjunction with Merrill Edge’s Asset Allocator Tool.

“It takes them through the process from start to finish,” explained Prasad.

When picking the 61 ETFs for the platform, Merrill looked as assets under management, since the larger funds have greater liquidity and better pricing, according to Paul Riley, managing director of Merrill Edge Product Solutions.

Tracking error, expense-ratio measures and bid-ask ratio spreads were also examined. “This way, we could get the highest liquidity and lowest cost in each category … ” Riley said, “and end up with a best-in-class group that’s unbiased in terms of the sponsor firms.”

Next Steps

Merrill Edge, which aims to attract as many Gen X and Gen Y clients as possible, will keep pushing out more online products, tools and information “to meet the goals of these investors,” Prasad said. “The demand is there.”

What’s likely to be the next Merrill Edge tool? “We are working on ideas for each of the asset classes, beyond mutual funds and ETFs,” he said. “We need to work with our Investment Management Group on the right protocols and framework to have the best in class, which gets harder in harder with alternative investments.”

Still, the Merrill Edge executive says, the group “just needs time to work through the models.”

“We have a road map to add incremental enhancements as we continue to grow …” added Reilly. “We could envision, say, adding [country or other specific ETFs], which would be more tactical purchases for clients to make, over time.”

Alternatives will be an option for Merrill Edge clients, Prasad stresses. “Yes, absolutely. It’s a matter of working through our processes. We will continue to expand the [product] list and make this part of the road map.”